SEC Sues Another Zack Morris Cohort For Stock Manipulation Scheme Worth Over $1 Million
Francis Sabo, known as Ricky Bobby in the fintwit world, was sued by the Securities and Exchange Commission for securities fraud. The case is related to the current case the regulatory agency has against Zack Morris and his so-called Goblin Gang for stock manipulation scheme, with the group also referred to as Atlas Trading.
“Francis Sabo promoted himself as a trustworthy stock-picking guru. In reality, he was a seasoned stock manipulator,” the SEC said in its suit.
The agency said that Sabo earned more than $1 million “in illicit proceeds from his participation in this stock manipulation scheme.”
In December 2022, the SEC charged social media personalities for stock manipulation reportedly generating them nearly $100 million in proceeds. The defendants is led by Morris (legally Edward Constantin), together with Perry Matlock (aka PJ Matlock), Thomas Cooperman (aka Tommy Coops), Gary Deel (aka Mystic Mac), Mitchell Hennessey (aka Huge Henne), Stefan Hrvatin (aka LadeBackk), and John Rybarcyzk (aka Ultra Calls). Daniel Knight (aka Deity of Dips) is also named a co-defendant as he “aided and abetted” the scheme through his podcast with Hennessey.
The regulatory body said that the group used their online platforms to rally behind a publicly listed stock to raise its price and then would dump their shares once it does.
The group allegedly engaged in a long-running fraudulent scheme to manipulate securities by publishing false and misleading information in online stock-trading forums, on podcasts, and through their Twitter accounts. The scheme would generally be executed in three phases:
- Identify a security to manipulate and purchase shares
- Promote the selected security on their social media platforms to generate demand and inflate the price
- Sell the shares usually at the higher price after the hype generated
The Department of Justice shortly followed suit, charging the same eight defendants with conspiracy to commit securities fraud after securing an indictment for the defendants from a federal grand jury. The gang potentially faces 25 years in jail.
The SEC’s case against Sabo runs in the same vein. Sabo is also part of Atlas Trading, the portfolio management forum ran by Morris and the gang on the Discord platform.
The regulatory body said that Sabo “understood that he was participating in an unlawful market-manipulation scheme,” citing a private Discord message he sent to Matlock: “hey the patterns is becoming to obvious with Atlas.. quickly gonna become exposed like the stocktwits pump bros . . . Hugh [Hennessey]/Mystic [Deel] post an idea … .2 mins later the other one joins! Incbob posts a swing idea . . . 2 mins later PJ [Matlock] joins! we cant do it on 95% of the plays.”
Sabo is said to be involved in some of the so-called “pump-and-dump” schemes concocted by the gang involving publicly listed small cap firms, including Regulus Therapeutics, Camber Energy, Torchlight Energy, and Infiniti Pharmaceuticals.
The defendant, together with other members of the gang, also sought to delete their private chats and social media posts they thought might implicate them in violations of the securities laws.
“btw how did u delete our chat history? i want to do that lo,” Sabo commented to Matlock, according to the filing. Matlock replied: “Oh I have a script for it I’ll send it to you . . . So there isn’t a bot that can delete chats and delete messages. But I wrote something that you can inject into discord and it just wipes sh*t lol.”
Morris and some members of the gang are currently out on bail. The controversial online influencer, who has a storied public feud with the SEC, is arguing that one of the counts alleging money laundering should be dropped. The DOJ, however, opposed this legal argument and said plainly that Morris is wrong in interpreting the law.
“In the Motion, Defendant Constantinescu seeks to dismiss that Count, arguing that the text of the statutes do not cover securities fraud. The Defendant is wrong,” the DOJ said in its filing. “The statutes’ text, structure, history, and treatment by courts compel the conclusion that the statutes apply to the Defendant’s charged conduct.”
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.